High Oil Prices Research Articles

THE IMPACT OF OIL PRICES ON INFLATION: THE CASE OF AZERBAIJAN

This paper investigates the relationship between inflation, oil prices and exchange rate in Azerbaijan using the Vector Error Correction Model (VECM) to the data ranging from 1995 to 2017. The results from cointegration method confirm the existence of a long-run relationship among the variables. Moreover, estimation results of VECM show that the oil prices and exchange rate have positive and statistically significant impact on inflation in the long-run. This implies that 1% increase in oil prices and exchange rate increases inflation by 0.58% and 1.81%, respectively. Results of the study also reveal that inflation is observed during the periods of both high and low oil prices, and the exchange rate acts as the transmission channel from oil prices to inflation.

Comments: In Search of Profitability

Editor's column With the shale industry still awash in red ink, and oil prices falling, it may take more consolidation to try to bring some financial stability to the sector. The financing strategy of the shale sector has always differed from onshore conventional oil business models. The small and medium-sized independents that have dominated shale have operated with much higher levels of debt and, since the beginning of the unconventional rise, have operated with negative free cash flow. Although production has skyrocketed, profitability has not, and Wall Street investors have grown tired of financing a largely unprofitable piece of the oil and gas business. The International Energy Agency (IEA) predicted last year that the shale industry would finally achieve positive free cash flow this year as oil prices rebounded and new pipelines relieved bottlenecks that had depressed prices. But the sharp downturn in oil prices in the fourth quarter and the recent decline to near $50/bbl (WTI) has not helped. When the shale boom was taking off between 2010 and 2014, high oil prices led to huge financial backing. Investment quadruped during that period, according to the IEA, as oil production increased from 0.44 million B/D to 3.6 million B/D, the fastest oil growth since the advent of Saudi Arabia’s giant oil fields in the 1960s. When oil prices tanked beginning in 2014, shale firms, along with the rest of the industry, switched to sharply cutting costs and trying to instill capital discipline. It was too much for some. More than a hundred shale firms filed for bankruptcy during 2015–16. Banks became more reluctant to lend money, even after oil prices began to recover, leading to a wave of lending from private equity firms. Production from the sector continued to defy odds, but profitability was still not in sight. BP’s most recent bellwether Statistical Review of World Energy, released in June, noted that US oil and gas production growth accelerated in 2018 at another record pace. The production growth “exceeded any other country’s annual increase in our 50-year history” of publishing the review, said BP Chief Economist Dale Spencer. “Indeed, the US achieved a unique double-first last year, recording the single largest-ever annual increase by any country in both oil and gas production. In case there was any doubt, the US shale revolution is alive and kicking,” he said. Since 2012, US oil production, including natural gas liquids, has grown by more than 7 million B/D, “broadly equivalent to Saudi Arabia’s crude oil exports, an astonishing increase which has trans-formed both the structure of the US economy and global market dynamics,” he added. But how long this revolution can continue without solid economic footing is unclear. One trend under way is consolidation. Two years ago, many independents began selling off assets so they could continue drilling. Today, many are pursuing assets sales, drilling partnerships, and other alternative financing strategies, according to an article in The Wall Street Journal. A new wave of company consolidations and buyouts by larger firms may have started. Chevron attempted to buy Anadarko and its sizable presence in the Permian Basin but was beat out by Occidental. Although Shell and other majors have indicated that, while interested, current selling prices for some companies appear too steep, the Anadarko deal could be the first of many that attempts to bring some stability to the shale sector and increases the presence of larger, more diversified firms.

KRYZYS EKONOMICZNY W FEDERACJI ROSYJSKIEJ W LATACH 2014-2016

The economic collapse in the Russian Federation observed in the years 2014-2016 is a result of overlapping negative trends both internally and externally. It should be emphasized that the economic shock caused by external factors in the form of economic sanctions imposed on Russia by Western states and the fall in oil prices on the world markets only accelerated the onset of the economic crisis but was not the main cause of its emergence. In this case the more important was an ineffective economic policy, which made economic development dependent on the prices of natural resources, primarily energy resources and it led to a deep structural crisis. In this context, the term “lost decade” has been used to emphasize the fact that the authorities have lost the chance to carry out deep structural reforms. Necessary and extremely costly economic, political and social reforms should were to be carried out during the economic prosperity that was fueled by persistent high oil prices. Introducing the above reforms during the crisis may not be feasible, however, the complete abandonment of such projects will make it impossible for the state to protect itself against future crises.

The impact of changes in oil prices on monetary and trade policy in Algeria (2000-2017)

As Algeria is considered among the rentier states that depend on oil revenues in the implementation of projects and development programs, like other rentier countries of the world, they are affected by fluctuations in oil prices in world markets, and any sudden shift in prices and the subsequent recession and prosperity in economic cycles are situations that policymakers find it difficult to manage effectively. The volatility of prices has exerted effects on the economic policies of the state as a result of monetary and trade policy and fiscal policy negatively affected and positively with the volume of volatile oil revenues, Algeria witnessed the positive and negative fluctuations of oil prices during the period 2000-2017, from the beginning of 2000 to 2014 known In fiscal terms through surpluses resulting from the high oil prices and in the period 2015-2017 has been characterized by a deficit in financial returns, so Algeria sought to take the necessary measures to stabilize its economy in both cases, through its adopted economic policy

Dynamic Data Sampling Approach by Using Price Distribution of Crude Palm Oil to Forecast High Magnitude Price Movement

Traditionally the chemical industry uses coal, minerals and petroleum as its basic raw materials, but palm oil and palm kernel oil are being increasingly used as economical raw materials especially for the production of oleochemicals. High magnitude palm oil price volatility in recently years has been a major challenge faced the industry. Though many time series models have been developed, few have wide adoption in the industry, and one of the key issues is the sampling interval used in the models. To date, little effort has been spent on mining historical data to determine the representativeness of interval sampling. This paper presents a novel approach in identifying price equilibrium for crude palm oil by mining the sampling amount through historical price distribution. Evaluation is done on the outcomes of the experiment, and analysis is performed on the attributes of each different criteria of the price distribution. The performance of the proposed approach is also compared to the conventional Bollinger Band with static sampling size. Overall, the preliminary results show that price distribution with leptokurtic distribution outperforms other price distribution patterns, this will definitely assist further works to devise a novel financial time series analysis technique.

Main Trends and Key Takeaways

Upbeat sentiments prevailed in both the foreign exchange and the equity markets in Russia on the back of high oil prices and temporarily absent threats of new sanctions. These factors, however, are the ones that are driven by most unpredictable dynamics.

The Role Of Bank Interest Rate In The Competıtıve Emergıng Markets To Provıde Fınancıal and Economıc Stabılıty

Financial and economic stability are two main significant concepts of the countries. Many different actions are taken in order to reach this objective. In this process, interest rate plays a key role because it mainly affects the cost of investments and consumption decisions of the parties. Therefore, the determinants of interest rate should be identified to have more effective financial market. This study aims to determine the influencing factors of bank interest rate in Turkey. Within this framework, seven different independent variables are selected based on literature review. Moreover, quarterly data of these variables for the periods between 2001:01 and 2018:02 is taken into the consideration. Furthermore, multivariate adoptive regression splines (MARS) model is used in the analysis process. The findings show that inflation, foreign debt, budget deficit, current account deficit and high oil price are the main determinants of high interest rate in Turkey. Therefore, it is obvious that Turkish government should take some actions to minimize these macroeconomic problems. In this context, inflation targeting plan should be implemented more effectively with the coordination of the government and central bank. Additionally, budget discipline should be maintained in order to prevent budget deficit. Furthermore, the government should take some measures to reduce the demand for imported goods, so current account deficit can be decreased. With the help of these actions, it can be more possible to decrease interest rate in Turkey. Lower interest rate has an increasing effect on the investment which contributes sustainable financial and economic growth.

Muted market signals: politics, petroleum investments and regulatory developments in Tanzania

ABSTRACTThis article contributes to an emergent literature identifying expectations and domestic politics as the drivers of change in Africa’s ‘new oil’-producing countries. Whereas much attention has been paid to weak institutions as an explanation for the resource curse that has marred Africa’s petroleum economies, the article points to the interplay between oil markets and domestic politics that is still under-researched. Based on empirical research into contractual and regulatory changes in mainland Tanzania, the article provides an overview of the development of the country’s petroleum sector and argues that for a new oil country it is a constant struggle to keep abreast of market signals. Changes to contractual and regulatory regimes therefore tend to come rather late in the price cycle, both when high global oil prices allow for tougher fiscal terms and when falling prices call for downward adjustments. This was the case historically and is no less the case in today’s resource nationalist environment, in which terms have been toughened despite falling global oil prices. Driven by electoral politics, decision-making has been politicized to such extent that exploration activities have come to an almost complete halt and no new contracts are being signed.

Comments: A Year of Uncertainty

Editor's column Late December/early January is the time of year when industry outlooks are announced, revealing company spending plans, oil price predictions, and potential stumbling blocks. The steep drop in prices in the fourth quarter of 2018 made these outlooks particularly challenging, and most are laced with cautious optimism about the year ahead. But common themes emerge: the industry is still in cost-containment recovery mode; the march toward digitalization is in full swing; and shale output from the US will only increase as pipeline bottlenecks began to ease with new construction. This past year was one of recovery, as the downturn that began with the price crash in 2014 appeared to be over, although that view is not unanimous. Capital expenditures rose last year because of higher oil prices but spending was cautious, and that caution was validated when both Brent and WTI prices fell about $30/bbl during the fourth quarter. A price rally in January began to ease concerns that the industry was in another free fall. Oil and gas spending growth rose 4% in 2017 and 5% in 2018, according to the International Energy Agency (IEA), after dropping 60% during 2014–16. The US shale sector contributed largely to that growth, as spending on unconventionals outstripped interest in conventional oil and offshore. Majors increased their visibility in unconventionals in plays such as the Permian Basin. Shale remains a bright spot, and will allow the US to likely remain the world’s largest producer of liquids and gas. Global oil inventories have come down significantly since the downturn, even with the increase in US production. But major uncertainties exist, making this year “even more hazardous than usual” to forecast trends in 2019, an IEA spokesman was quoted as saying. That uncertainty is reflected in a recent survey of more than 30 oil analysts, who predicted that Brent prices would end the year anywhere from $30/bbl to $78/bbl. Deloitte’s 2019 industry outlook states that “opportunities from digital technologies are becoming increasingly apparent and have the potential to unlock new value.” As featured in JPT over the past year in particular, more companies are employing or experimenting with artificial intelligence, automation, machine learning, robotics, and blockchain, often attracting nontraditional vendors and startups. The offshore sector has yet to recover. US Gulf of Mexico (GOM) production rose last year but drilling activity did not, and the rig count ended the year at an 81% utilization rate. There were 36 active deepwater GOM sites at the end of the year, compared with 49 in early 2017, according to the US Bureau of Safety and Environmental Enforcement. Norway’s upstream regulator is not optimistic about spending there. Oil and gas production will fall 4.7% this year to 1.42 million B/D after a 6% drop last year, according to an annual report by the Norwegian Petroleum Directorate. Mexico’s offshore may be a bright spot, but the industry is still looking for signals from the new government that it is friendly toward private sector E&P.

Reservoir forming conditions and key exploration technologies of Lingshui 17-2 giant gas field in deepwater area of Qiongdongnan Basin

On September 15, 2014, China National Offshore Oil Co., Ltd announced that a high production of oil and gas flow of 1.6 × 106 m3/d was obtained in Well LS17-2-1 in deepwater area in northern South China Sea, which is the first great oil and gas discovery for self-run deepwater exploration in China sea areas, and a strategic breakthrough was made in natural gas exploration in deepwater area of Lingshui sag in Qiongdongnan Basin. Under the combined action of climax of international deepwater exploration, high oil prices, national demands of China, practical needs of exploration, breakthroughs in seismic exploration and testing technologies, innovations in geological cognition and breakthroughs in deepwater operation equipment, Lingshui 17-2 gas field is discovered. Among these factors, the innovation in reservoir forming geological cognition directly promotes the discovery. The quality of seismic data in the early time is poor, so key reservoir forming conditions such as effective source rocks, high quality reservoirs and oil-gas migration pathways are unable to be ascertained; with support of new seismic acquisition and processing technology, some researches show that Lingshui sag is a successive large and deep sag with an area of 5000 km2 and the maximum thickness of Cenozoic stratum of 13 km. In the Early Oligocene, the Lingshui sag was a semi-closed delta-estuarine environment, where the coal-measure and marine mudstones in Lower Oligocene Yacheng Formation were developed. The Lingshui sag is a sag with high temperature, and the bottom temperature of source rocks in Yacheng Formation can exceed 250 °C, but the simulation experiment of hydrocarbon generation at high temperature indicates that the main part of this set of source rock is still in the gas-generation window, with resources of nearly 1 trillion cubic meters, so the Lingshui sag is a hydrocarbon-rich generation sag. In the Neogene, the axial canyon channel from the Thu Bon River in Vietnam passed through the Lingshui sag, and five stages of secondary channels were developed in the axial canyon channel, where four types of reservoirs with excellent physical properties including the axial sand, lateral accretion sand, natural levee sand as well as erosion residual sand were developed, and lithologic traps or structural-lithologic traps were formed. The diapiric zone in the southern Lingshui sag connects deep source rocks in Yacheng Formation and shallow sandstones in the channels, and the migration pattern of natural gas is a T-type migration pattern, in other words, the natural gas generated from Yacheng Formation migrates vertically to the interior of the channel sandbody, and then migrates laterally in the channel reservoirs and forms the reservoirs. Innovations of geophysical exploration technologies for complicated geological conditions of deepwater areas are made, such as the detuning comprehensive quantitative amplitude hydrocarbon detection technology, which greatly improves the success rate of deepwater exploration; key technologies of deepwater safety exploratory well testing represented by the platform-dragged riser displacement technology are developed, which greatly reduces the drilling test cost. The above key exploration technologies provide a strong guarantee for the efficient exploration and development of Lingshui gas field.

Global Solar Energy Trends and Potential of Building Sector In Hungary

As the present trends show current policies lay more stress on using solar energy and renewable energy sources as some years before. There is a 175 000 TW power of solar energy, which came from the Sun. If it could be exploited, less than 10 % of this would be enough to cover the human economy. The solar energy has an important role in the reduction of the Ecological Footprint of humanity. This research would be offered a survey the global solar energy trends and the potential of building sector in Hungary. Furthermore, also the alternative energy sources appeared in the transport: many governments give financial assistance to the proliferation of electric cars. Government and policy support for renewable energy has increased considerably over the past decade. Two drivers underpin this trend: first, the effort to constrain growth in greenhouse-gas emissions and, second, concerns to diversify the supply mix (promoted particularly by high oil prices, especially in 2005-2008). To address these concerns, more and more governments are adopting targets and taking measures to enhance the share of renewables in the energy mix.

Republic of Madagascar: Fourth Review Under the Extended Credit Facility and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Madagascar

This paper discusses Madagascar’s Fourth Review under the Extended Credit Facility (ECF) and Request for Modification of Performance Criteria. Madagascar’s economic recovery continued in 2018, notwithstanding challenges related to the presidential election in November/December 2018. While some economic pressures developed in the second half of 2018, economic conditions remained generally positive. The discussions focused on maintaining progress on the key objectives of the program, especially boosting fiscal space for priority investment and social spending by containing lower priority spending. The main challenges involved fuel pricing and transfers to the public utility, JIRAMA. Other issues included structural reforms to promote inclusive growth, most notably in investment capacity, the financial sector, and governance. The outlook continues to be generally positive. Pursuit of economic reforms should yield results, while the pressures in 2018 from higher oil prices and pre-electoral weakness in confidence abate under the baseline. As a low-income country with an open economy, Madagascar remains vulnerable to exogenous shocks.

Airport management perspectives on aviation biofuels: drivers, barriers, and policy requirements in the US Pacific Northwest

This study explores perspectives of airport management on aviation biofuels in the Pacific Northwest of the USA by administering an online survey of airport managers in FAA certified airports in the region. Respondents provided their opinions on factors important for sustainable aviation fuel (SAF) development in the Pacific Northwest, including perceptions of various potential drivers and barriers to scale-up in the region. Most respondents indicated that policy certainty to attract capital, higher oil prices, and technology breakthroughs are required for a viable industry, and they also indicated that government intervention is important to ensure successful adoption and implementation. Respondents indicated that aviation biofuel tax credits, a system to issue and trade sustainable biofuel certificates, and fuel sustainability certification criteria are required policies/protocol to ensure viability. We suggest that a regional approach to examining barriers, drivers, and policy requirements provides more nuanced perspectives regarding key SAF development and scale-up issues.

Dutch Disease Dynamics Reconsidered

In this paper we develop the first model to incorporate the dynamic productivity consequences of both the spending e ect and the resource movement e ect of oil abundance. We show that doing so dramatically alters the conclusions drawn from earlier models of learning by doing (LBD) and the Dutch disease. In particular, the resource movement e ect suggests that the growth e ects of natural resources are likely to be positive, turning previous growth results in the literature relying on the spending e ect on their head. We motivate the relevance of our approach by the example of a major oil producer, Norway, where it seems clear that the predictions based on existing theory do not apply. Although the e ects of an increase in the price of oil may resemble results found in the earlier Dutch disease literature, the effects of increased oil activity do not. Therefore, models that only focus on windfall gains due to increased spending potential from higher oil prices, would conclude - incorrectly based on our analysis - that the resource sector cannot be an engine of growth.

Does Risk Sharing Contract Foster the Investment Climate of Malaysian Marginal Oil Fields?

The emergence of Risk Sharing Contract (RSC) in the Malaysian oil and gas industry in 2010 was to improve the investment climate for the growing number of marginal oil fields. Notwithstanding the effort, only six RSCs were signed within five years (2010-2014). This warrants for the examination of whether or not the RSC fosters the investment climate of marginal oil fields in Malaysia. For that purpose, a sequential mixed method approach (scenario analysis and interview) was undertaken. The scenario analysis adopts three measures of investment appraisal (Profitability Index, Access to Gross Revenue and Saving Index), to measure investment climate under two scenarios, namely Revenue/Cost factor Profit Sharing Contract (R/C factor PSC) and RSC. The analysis was conducted under different oil price and reserves level. Results reveal that RSC improves the investment climate of marginal oil fields under low and medium oil prices, while R/C factor PSC is better off under higher oil price. The interview provides a consistent result with the scenario analysis. Further, the interview results recommend a few additional incentives in order to foster the marginal oil fields in Malaysia. The findings would provide insights to policymakers in their effort to enhance the attractiveness of marginal oil fields in Malaysia. In the same vein, the study would benefit other countries that experience an increase in the number of marginal oil fields. In line with its findings, the study highlights the scope for improvement. The direction for future research is also highlighted.

Fusion of dielectric technique and intelligence methods in order to predict acidity and peroxide of virgin olive oil

Olive oil is one of the strategic and rich in minerals and nutrients among different oils. Due to the high price of olive oil, the quality of this product has a very important factor for consumers. Generally, the quality of olive oil is measured by two indexes of acidity and peroxide value. In this research, dielectric technique, artificial neural network (ANN) and support vector machine (SVM) methods were used to predict the acidity and peroxide value of olive oil. To analysis of output data in the range of frequency 1 KHz10 MHz, the artificial neural network with a topology of 1861-15-10 for acidity value and topology 1861-23-10 for peroxide value were predicted. Also, the best result of vector support was obtained by Gaussian algorithm with accuracy of 0.99. The results showed that the device and the evaluation methods were appropriate for prediction of acidity and peroxide value of olive oil.

The feasibility of using image processing and artificial neural network for detecting the adulteration of sesame oil

Sesame oil is one of the most important nutritional and economic products in the world, which yields a high economic value for many countries every year. The production of sesame oil due to the complex process is very costly and this will increase the price of the product. High prices of sesame oil provide the condition and motivate profiteers to misuse this situation. The main method of misuse is to mix oils such as corn, canola, sunflower, and soybean oil into pure sesame oil. Therefore, the main goal of this study is to evaluate a portable intelligent system for detecting oil adulteration using the technology of machine vision. For evaluation of the adulterated sesame oil, 13 samples of oilseed, sunflower and canola, which included different percentages of their mixing, were prepared. In order to detect the adulteration of sesame oil, artificial neural networks were designed and evaluated with a hidden layer with a number of different neurons (from 1 to 20). The best network with structure 12-6-7 provided for the prediction of mixed samples of sesame oil and sunflower seeds, correlation coefficient (R) and mean square error (MSE) of 0.944 and 0.006, respectively. Also, the best network with structure 12-10-7 to predict the mixed samples of sesame oil and canola provided correlation coefficient and mean square error of 0.946 and 0.0003, respectively. These results show the success of color modeling for detecting of adulteration in pure sesame oil.

Uncertainty and Sign-Dependent Effects of Oil Market Shocks

This paper investigates the oil market reaction to its fundamental shocks: supply, aggregate demand and oil-specific demand in different regimes characterised by high versus low uncertainty in the market. We do so by first proposing a novel oil uncertainty index that is measured by the conditional volatility of the unpredictable component of oil prices. Then, we employ a nonlinear model to show that the structural oil market shocks have asymmetric effects. For instance, in relation to real economic activity, we find that both supply shocks and oil-specific demand shocks have negligible impacts in periods of low oil price uncertainty but sizeable effects in periods of high oil price uncertainty. Our model also enables us to evaluate the hypothesis that real economic activity responds asymmetrically to unexpected increases and decreases in oil prices driven by supply and specific demand shocks. We find that the effects of oil supply shocks are asymmetric but oil specific demand shocks are not, which indicates that the (a)symmetric oil market reaction depends on the underlying market shocks.

Global Fossil-fuel Subsidy Reform and Paris Agreement

The recent downward trend in the international energy prices, combined with the rapid transition in the national energy mix and widespread efforts towards national energy market liberalization have challenged the mitigation potential of the global fossil-fuel subsidy reform. In this paper, we focus on 25 countries with large fossil-fuel consumption subsidies and estimate the impacts of fossil-fuel subsidy reform on achieving country-specific emissions reduction targets defined by the Nationally Determined Contributions (NDCs) under different oil price projections. Our results suggest that the elimination of the fossil-fuel consumption subsidies could be an efficient mechanism for meeting NDC targets for an important subset of countries, even if only leading to global emissions reduction of between 1.8-3.2% in 2030 depending on the oil price scenario. Out of 17 countries with binding unconditional NDC targets, nine overreach their 2030 commitments under high oil price scenario and six under low global oil prices. Furthermore, eleven countries reach at least 50% of their NDC reduction targets following subsidies elimination under low global oil price path.

Foreword

According to the OECD Economic Outlook from the 21st of November 2018, the global expansion has peaked. Global GDP growth is projected to ease gradually from 3.7% in 2018, to around 3½ per cent in 2019 and 2020, broadly in line with underlying global potential output growth. In the near term, policy support and strong job growth continue to underpin domestic demand. However, macro-economic policies are projected to become less accommodative over time, and headwinds from trade tensions, tighter financial conditions and higher oil prices are set to continue.....